Want to make a million? Don’t hire a psychopath investor to manage your money

It turns out that once again the general consensus, paradoxically referred to as “common sense,” is wrong. For decades we have believed that, while psychopaths may not be nice people, they are great for beating the competition and making the big bucks. So while you may not want to marry a psychopath, or even work for one, when it comes to your money, you do want a psychopathic investment advisor who can play the game for blood.

Uh — guess not. It turns out that hedge fund managers with high levels of psychopathic traits produce below average results compared to their peers, according to a recent study. Furthermore, their clients had to deal with more volatility to get those mediocre results.

Some background information: psychopathic personality disorder, or psychopathy, is characterized by persistent antisocial behavior, lack of empathy and remorse, and unrestrained, self-centered traits. It is often associated with narcissism, a pattern characterized by exaggerated feelings of self-importance, a huge need for admiration, and, like psychopathy, a lack of understanding of others' feelings.(If that sounds like someone you work with, you should probably email me for strategies on how to deal with him or her.)

So why were we wrong about psychopaths being so good at their jobs? It doesn’t help that every movie and TV show portrays the most successful investors as slightly unhinged. Famously, the hedge fund manager on Showtime’s Billions has only one functional relationship — the one with his performance coach. But there are deeper psychological reasons that explain why psychopathic investors tend to fail. One of the study’s co-authors, Leanne ten Brinke, speculated that it “might be because narcissism, associated with overconfidence, causes fund managers to stick longer with ideas that just aren’t working.”

Here’s another hypothesis. One of the defining characteristics of people with psychopathic personalities is that they don’t learn from experience. They persist in behavior patterns that are highly destructive to others, as well as to themselves, because they are unable to draw the link between their behavior and its consequences. They simply can’t see themselves as others see them.

We do love those bad boys. There’s something very compelling about how they play fast and loose with the rules and get away with it. But letting them play with your money? Seems to be a really bad idea.